Paul B. W. Miller is a professor at the
University of Colorado at Colorado Springs
and Paul R. Bahnson is a professor at Boise
State University. The authors’ views are
not necessarily those of their institutions.
Reach them at paulandpaul@qfr.biz.

We begin by repeating this Feb. 24, 2010, quote from the American In- stitute of CPAs’ Barry Melancon:“Our increasingly global economy makes itclear that the U.S. should move toward a sin-gle set of high-quality, globally accepted ac-counting standards for public companies.”After quoting it in our most recent column(“Be careful when you wish for high-qualityglobal standards,” May 10-23, page 16), wechallenged the assumption that convergenceis the path to high quality. We described 20critically needed GAAP reforms that wouldmake financial statements more useful tousers for making rational decisions. Unfor-tunately, switching to International FinancialReporting Standards won’t eliminate inferiorpractices and could even make them moredifficult to correct.

This column describes how Melancon’s
claim that international uniformity would
help the global economy is superficially attractive but unattainable.

IS UNIFORMITY A WORTHY GOAL?
The flawed assumptions underlying this argument for adopting IFRS hold that “a single
set” of standards will produce uniformity and
that uniformity is a good thing because it always creates comparability. Ah, if only life,
and accounting, were that simple. Below, we
discredit the false premises behind that proposition and explain the negatives of seeking
uniformity without usefulness. Throughout,
we challenge conventional wisdom and those
who call for international standards without
substantive reform.

UNIFORMITY ISN’T COMPARABILITYThe pivotal assumption that uniformity leadsto comparability springs from informationsuppliers’ self-serving rationalization for theeasy way out, usually expressed by saying,“At least everyone is doing the same thing.”That idea is totally simplistic because it ig-nores output content and quality. Uniformityproduces comparability only when similarevents and conditions are similarly and use-fully described in statements. It isn’t createdmerely by recording those similar events orconditions the same way. Here are two ex-amples out of many:

IS IFRS UNIFORM?

Melancon’s comment reflects the invalid
assumption that IFRS is already uniformly
applied throughout the world. That is just
not true because most who are said to have
adopted IFRS haven’t really done so.

Here’s a quote from the Feb. 19, 2009, let-ter sent by the National Association of StateBoards of Accountancy to the Securities andExchange Commission on the roadmap pro-posal: “Many of the more than 100 countries[that] have endorsed IFRS use only that por-tion of IFRS that is useful for their purposes.Some countries have adopted only a limitednumber of the standards. Countries that haveadopted IFRS have made changes to the ac-counting standards promulgated by the [In-ternational Accounting Standards Board] inorder to satisfy their local reporting needs.Such needs are influenced by substantial le-gal, cultural and environmental influences.As a result of such needs, jurisdictional vari-ants of IFRS have become the norm and arelikely to continue into the future. There is sim-ply no assurance that all countries embracingIFRS will apply the standards in the same wayto achieve comparability — the chief benefitargued for a single set of standards.”An e-mail from David Costello, NASBA’spresident and chief executive, added thispoint: “By our calculations, the countrieswhich have accepted totally IFRS compriseabout 4. 5 percent of the world’s GDP, roughlyequivalent to that of our states of Californiaand Georgia.”Bottom line, the world is not anywhereclose to having “a single set of high-quality,globally accepted accounting standards.” Toimply that one will instantly spring into ex-istence when the U.S. gives up on GAAP iseither naive or manipulative.

NON-UNIFORM REGULATION?

Psychologists use the term “projection” to describe the tendency of people to believe that
all others think and act the same way they do.
(Consider how Marie Antoinette missed the
point by suggesting that, like her, the peasants
should just eat cake if they didn’t have any
bread.) However, education and thoughtful
reflection on first-hand experience can allow
people to comprehend that everyone’s situation is not the same.

We make this point because vocal American advocates for IFRS seem to assume the
rest of the world has regulatory and enforcement systems on the same order as the U.S.
SEC. To the contrary, the SEC is the product of
75 years of hard work and millions upon millions of dollars. There are no other market regulators with its human, financial and political
resources. Yet even it struggles to stay ahead
of auditors and managers who deceive and
defraud by bending and breaking GAAP.